IoT monetization and how CSPs can improve it
IoT: still a hype or becoming a reality?
Overhyped market predictions are not uncommon, we have all seen some of those (remember 50 billion connected devices by 2020?). Instead of looking in the unknown and uncertain future, let’s check the current state of the IoT market:
- The number of massive IoT connections increased by a factor of three during 2019, reaching close to 100 million.
- 2019 worldwide spending on software and hardware around IoT is estimated to be around USD726 billion.
- Currently, we have around 11 billion connected devices (approximately 20 percent compound annual growth rate (CAGR).
- Most enterprises (around 66 percent) already use IoT.
When it comes to technology development, most of the components of the IoT stack are now quite advanced. There's a wide spectrum of different connectivity technologies available, more than 500 IoT platforms in the market and lots of development tools available. All that, coupled with the big drop in connectivity and hardware prices, has made connecting things and deploying IoT solutions much easier.
How are CSPs capturing value in IoT?
However, despite the market potential and technology advancements, CSPs are struggling to capture its value. IoT revenues for CSPs are at best just one percent of their total revenues. Most of these revenues come from connectivity, a rather small part of the overall IoT solution, where the margins are quite low. We also see these challenges in our customer engagements - one big Tier 1 operator has invested significant resources in deploying four different market leading IoT platforms, together with one of the most comprehensive API Management tools currently available, and was still not able to see a significant uptake in IoT business.
Moving up the value chain is not easy. It requires investments, competency build up and partnerships. But CSPs are well positioned to capture value from the upper layers of the stack, by providing added-value services on top of its connectivity capabilities.
Why then, despite all these market advancements, potential and investments, are CSPs not able to monetize IoT?
A key IoT monetization barrier: complex exposure and (lack of) integrations
IoT is a complex, scattered and fragmented ecosystem. Consequently, interoperability and integrations present a significant challenge.
In IoT, end applications ultimately deliver desired business outcomes by combining devices, data, and analytics to produce new, business-relevant insights. To be able to do this, IoT applications need to be integrated into multiple endpoints. This is where the challenge lies. These endpoints can be an IoT and network domain, but they can also be an IT system (CRM, ERP, or billing, to name a few).
Integration points can be also external (some use cases may require, for example, road traffic information, weather information, information from the Tax Agency, and so on). Diverse and heterogenous data comes from all these systems. In one of our Smart Cities engagements, we were assigned to create a centralized command dashboard (a unified layer), integrating heterogeneous data, audio, and video streams from various external systems, such as street lighting, public Wi-Fi, various environmental sensors, and parking systems for instance.
In addition, most CSPs have been traditionally conservative and rather slow when it comes to exposing their systems and opening up to the external world via APIs. This also makes integrations and ecosystem development complex and costly.
Knowing this, it’s no wonder why many IoT surveys and studies reveal that of all the reasons for IoT failures, improper integration of application tops the list. Integration and implementation costs are also prevalent issues – around 50 percent of the costs of implementing IoT solutions is spent on integration with various systems.
So, which approach should CSPs follow?
Recommendations and conclusions
What should CSPs focus on to create a value around IoT and improve their position in the value chain? We prepared some recommendations:
- IoT is more of a business challenge, not a technical one. As we said, surrounding technologies are quite developed and advanced, but monetization is a key challenge.
- Don’t separate IoT from IT and especially not from business. Don't make IoT an isolated island.
- Stop chasing a "killer use-case" and focus more on enablement, exposure and capabilities. CSPs are perfectly positioned to be IoT and ecosystem enablers and orchestrators. After all, connectivity is at the heart of IoT.
- Embrace a cloud-native and microservices-based approach and philosophy. This will offer you the agility and opportunity to open up within the ecosystem and attract developers.
- Embrace APIs and an API-first approach to any kind of development. Open up, expose your services to developers. APIs are not only an integration technology but a strategic asset. They are the key digital transformation, partnering and ecosystem enabler.
What is your experience with IoT? Have you dealt with similar challenges? Our new IoT Application Services offering enables IoT monetization by improving Time to Market while leveraging AI-driven operations.
Our IoT application services include API framework for IoT Application integration, IoT Application Development and IoT Application Operations. The API enablement framework enables a faster launch of IoT services by 30 percent, through simplified exposure and ease of integrations. Our rich set of delivery accelerators and reusable assets allows us to achieve a 30-40 percent reduction in IoT application development costs. And our Artificial Intelligence powered IoT Application Operations streamlines your complex multi-vendor and multi-stack IoT operations.
Learn more about Ericsson's approach
Would you like to know more about how Ericsson can help communication service providers to monetize on IoT? Read more about Ericsson IoT Application Services.
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